Insurance: Island high-rise faces high premiums

by Molly McCartney. Islander Reporter

Jack Morse, a retired science teacher and the president of the Martinique North condo board, worries about insurance costs next year when the rate freeze ends and as Citizens looks more closely at big multi-million dollar buildings. Meantime, he just signed a check for $19,400 for flood insurance for the complex. Islander Photo by Molly McCartney

The Martinique North complex is one of two high-rise structures on the beach and also one of the most expensive to insure. Islander Photo by Molly McCartney

Jack Morse, the retired science teacher who now serves as board president for Martinique North said, “They’re killing us.”

The sudden leap in premium for Martinique North caught the 61 unit owners and their condo board by surprise. They had to move quickly to pay the bill from Citizens Property Insurance Corporation, the state’s insurer of last resort. It was a struggle to meet the payment deadline, but they made it.

In the process, they came face to face with the painful realities of the Florida insurance market, its soaring premiums and limited availability. And although the market appears to have improved in some respects, prices continue to hover at near record levels.

And now there is a new threat on the horizon as Citizens begins a closer scrutiny of big multi-million dollar residential condominium properties.

Right now the Martinique North wind rates are frozen, thanks to the insurance reform law passed last year. But the freeze ends in January 2009 and it isn’t clear what will happen to rates in the thaw.

Morse is concerned that the next appraisal of the two Martinique buildings could push one of them over the $10 million mark, landing his condo in a controversial new category of what Citizens calls the A-Rate properties. Citizens reviews, rates and renews insurance for such condos on an individual risk basis.

Established by Citizens about 18 months ago, the A-Rate risks are “not subject to Citizens’ filed and approved rates,” according to Citizens representative Christine Turner. This appears to mean that it is up to Citizens to determine what to charge these properties for insurance, rather than to apply the standard rates that have been reviewed and approved by the Florida Office of Insurance Regulation.

Nor are the A-Rate condos protected by the statutory rate freeze for other residential condominiums in effect through the end of this year.

“Some large commercial residential insureds with over $10 million in structural value have recently received renewal notices that reflect premium increases,” Citizens said in a statement. The statement said that the premium increases for the A-Rate properties may reflect some changes that Citizens imposed earlier this year in “rating rules and credits applicable to individually rated risks.”

Citizens has not responded to TheIslander’s questions about the price increases for A-Rate properties.

But Sarasota insurance agent Tom Danson told TheIslander that one A-Rate condominium in the Naples area has recently received a renewal notice from Citizens with a 31 percent premium increase.

“They were dumbfounded,” Danson said. He declined to identify the condominium, but said he was trying to get more information about the A-Rate issue, which has flared up in recent days as agents question the methods of Citizens’ renewals and premium increases for these properties.

Citizens now provides wind insurance for an estimated 27,000 condominium communities in Florida, a spokesperson said. About 410 have been identified by Citizens as A-Rate properties, the spokesperson indicated, and are subject to individual review and whatever rate Citizens decides is appropriate for the risk.

The Martinique North, which is now very close to becoming an A-Rate condo, was appraised in November. The larger of its two buildings now has a replacement value of $9.2 million, Morse said.

Located at 5300 Gulf Drive, the Martinique North structures are among the largest and best known on the beach. The Martinique North is adjacent to the Martinique South condominium, which has its own condo association. The units in both complexes are prized for their birds-eye views of the Gulf.

Controversy over the high-rise Martinique construction in the early 1970s triggered a citizen revolt and a mandate prohibiting any future high-rise buildings on Anna Maria Island.

Today, these two condo communities are among the most expensive to insure on the Island.

The 2008 wind premium for Martinique North is $30,778, a slight reduction that resulted from mitigation credits that the condo earned for installing new roofs and enclosing exterior stairways with hurricane glass. But that decrease doesn’t begin to make up for the big jump in price for the 2007 coverage, Morse said.

And what really riles him is the contradiction that he sees between the promise by state officials to provide insurance relief and the reality of the premiums that his condo still pays.

The Legislature and the governor predicted a decrease of 25 percent in the cost of insurance, he said, “But that’s a joke.”

The wind coverage for the Martinique North is about the same as last year, he said, after taking the mitigation credit into account.

“How stupid do they think we are?” he demanded.

And now, he said, there are new worries about what will happen to condo premiums when the freeze ends in January 2009 and when the Martinique attains A-Rate status with Citizens.

“We just don’t know what’s going to happen to our premiums,” he said.

The wind insurance is one of nine different insurance policies for Martinique North. The other policies include protection against flood, fire, liability, worker’s comp and other risks.

“Right now we budget $82,000 to pay for all our insurance,” Morse said.

As he was explaining the cost of insurance, an assistant arrived with checks for him to sign. One of them was a check for $19,400 to pay for flood insurance.

Morse said the big premium jump for 2007 wind coverage had his condominium board scrambling to pay the bill.

“How can you budget for a 200 percent increase that can be due in 30 days? You can’t. You have to go to the bank and borrow the money. Then you have to have a board meeting to approve a process for a special assessment to collect the money from all the owners. Then you have to notify unit owners of the proposal and they have to vote. You can’t do all that in 30 days.”

Morse said that the association also has had to struggle to comply with the Citizens requirement for advance payments for the full year of coverage. “In the past, you had to come up with all the money at once,” he said.

Under a new system now in place, Citizens will allow policyholders to make quarterly payments. But this option can cost more than a bank loan because of the additional fees associated with the payment plan.

Morse said that “800 people a day are leaving Florida” because of the high cost of property insurance, along with higher taxes. “As a result, we have very few buyers here,” he said.

The current tax law is as discriminatory as insurance, he said.

Looking at a residence that had a value of $552,444 in 1992, he said that the property tax today for that residence would be $2,217 for a Florida owner with a homestead exemption and the annual 3 percent cap on increases. But the tax on the same residence would be $9,919.10 - nearly five times as much - for a non-Florida resident without those exemptions or protections.

“This just isn’t fair,” Morse said.

He is particularly concerned about the problem that younger people face when trying to buy into the housing market in Florida, given the tax inequities and the insurance crisis.

“I’m from Taxachusetts,” Morse said. “And they have nothing on Florida. Here they nickel and dime you to death. It really is cheaper to live in Taxachusetts than here.”

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